While the world economy is growing slowly, China's economy is
still robust. The Yangtse delta region - including Shanghai, Jiangsu
and Zhejiang - continues to play a locomotive role in the country's
economy.

The GDP of China rose 7.3% to 9'593.3 billion Yuan (1'159 billion
USD) in 2001. The growth rate of the Yangtse delta region, in
the same period, was more than 10 %, two percentage points higher
than China's average. According to local statistic authorities,
the GDP of Shanghai reached 495.1 billion Yuan in 2001, an increase
of 10.2 %; in Jiangsu, the GDP was 951.5 billion Yuan, an increase
of 10.2 % and in Zhejiang 670 billion Yuan, an increase of 10.5
%.

The attached table shows that the momentum of the economic growth
in the Yangtse delta region strengthened during the first three
months of this year. The growth accelerated to 10.7 % in Jiangsu
and 11.4 % in Zhejiang. Although Shanghai had a growth rate of
only 9.6 %, considerably lower than the provinces, but still stable
and higher than China's average of 7.6 % for the same period.

The aggregated GDP of the delta region climbed to 2'116.5 billion
Yuan (255.6 billion USD) in 2001, accounting for 22 % of China's
total - a remarkable result compared to its rather low percentages
of population (10.9 %) and area (2.2 %).

2. Investment in Public Works: One of the Main
Contributors to Growth

TThe national economy was driven first by heavily increased investment
in public works, especially in infrastructure. Statistics show
that the completed investments in fixed assets grew at a rapid
rate of 19.6 % for the whole of the country in the first three
months of this year. It was even higher in the delta region for
the first three months of 2002: in Shanghai the rate was 21.2%,
in Jiangsu 24.9% and in Zhejiang 12.5 % (after a rapid increase
of 22.1 % in the year 2001). Within this year, 21 "mega-projects"
with a total investment of 50.4 billion Yuan (6.1 billion USD)
will be launched in Shanghai, focusing on the fields of traffic
facilities and environment protection.

A large scale of highway construction has been undertaken in
the delta region. In Shanghai, the highways under construction
amount to 160 km. The project of the magnetically-driven railway,
linking Metro-Line 2 and Pudong Airport, started in March 2001
and will be completed within two years. In Zhejiang, the government
reserved 8.4 billion Yuan in its budget for the year 2001 to prolong
its highway for another 143 km. The highway from Shanghai through
Hangzhou to Ningbo is being broadened to 6 or 8 lanes, and in
Jiangsu, the highway along the Yangtse river is under construction
(137 km), with an investment of 5.6 billion Yuan. It will be completed
before the end of 2004. These are only the most important examples.

3. Export and Foreign Investment: the Other Two Contributors to
Growth

The economic growth of the region , especially in the provinces
of Jiangsu and Zhejiang, was further supported by a rapid increase
of exports and foreign investments. In 2001, Shanghai exported
goods with a value of 27.63 billion USD, an increase of 9 % compared
to the previous year; Jiangsu exported 28.88 billion USD, an increase
of 12 % and Zhejiang's exports grew 18% to reach an amount of
22.98 billion USD. All the export figures were much higher than
China's average growth rate (6.8 %). The region's total export
value increased by 12.7 % compared to the previous year, and reached
79.49 billion USD, accounting for 30 % of China' total of 266.16
billion USD. Nonetheless it is important to see that the growth
rate of exports went down in the past few years - a "normalisation"
of export growth has thus taken place. The export-driven development
of the Chinese economy is typical for an industrializing country.
Given the size of the People's Republic the export dependency
of the country is bound to go down.

The delta region thus holds a leading position in China's foreign
trade. In fact, after Guangdong province, Jiangsu and Shanghai
ranked second and third in exports (including processing industries)
among the provinces of China. Zhejiang is one of the most aggressive
trading provinces in China: its export volume was considerably
bigger than its imports. In terms of ordinary trade (excluding
processing industries), Zhejiang is the biggest exporter in China.
Its trade surplus exceeded 11 billion USD in 2000 and 13 billion
USD in 2001, accounting respectively for 46 % and 58 % of China's
total. A strong contribution to the success of Zhejiang was made
by private and collective enterprises, getting more export rights
in the last few years. Private and collective enterprises exported
goods for 5.48 billion USD in 2001, an increase of 62.6 %. The
contribution rate of those enterprises to the export increment
of the province amounted to 59.7 %.

A similar situation was also shown in the delta's foreign investment.
The region saw an accelerating influx of foreign direct investment
since last year. The total foreign investment in terms of actually
utilised value was 13'952 million USD in 2001, accounting for
30 % of China's total ( 46'800 million USD). The foreign investment
in Shanghai reached 4'392 million USD in 2001 in terms of actually
used amounts, an increase of 39 %; in Jiangsu 7'350 million USD,
an increase of 11.5 % and in Zhejiang 2'210 million USD, an increase
of 37.1 %. In China as a whole, the increase was "only"
14.9 % for the same period. Foreign investment in terms of actually
utilised amounts continued to increase rapidly in the region during
the first three months of this year: in Shanghai it grew by 14.5
%, in Jiangsu by 60.2 % and in Zhejiang 45 %, compared to 27.5
% for the whole nation.

4. Economic Integration: a Tendency
in the Delta Region

Local protectionism still exists in China. In many areas it became
even stronger in the last few years. In the delta area, however,
a tendency for integration is growing, due to economic development,
increased common interests and the strong power of the central
government in Beijing. Modern highway networks and telecommunication
possibilities grow rapidly in the area and support the general
trend. Seeking closer economic cooperation, the Mayor of Shanghai
and the Governors of Jiangsu and Zhejiang met for a two-day forum
in Yangzhou in April 2002.

Nowadays, the local authorities in the delta region are making
efforts not only to attract foreign capital, but also to lure
investment from other provinces. Recently, mutual investments
grew considerably stronger. Shanghai, in particular due to its
special position as economic, financial, transport, logistics
and information centre, is the biggest importer of net capital.
During the first three months of this year, the investment from
other provinces in Shanghai totalled 9.8 billion Yuan (in more
1300 projects), a rise of 25 % compared to the same period of
last year. Among the main investors were enterprises from Beijing,
Zhejiang, Jiangsu and Liaoning. Some enterprises start to move
their headquarters to Shanghai.

Investment from other provinces is also increasing in Jiangsu,
due to its good location, especially in the southern part of Jiangsu,
where the famous "new markets" like Suzhou and Wuxi
are located.
The fact that Zhejiang as the biggest net capital exporter has
been noticed by the Chinese media. The people of Zhejiang became
rich through their business activities all over the country and
the world. They have accumulated enormous wealth, concentrated
mostly in private hands. A considerable amount of the capital
is re-invested in their home places - it accounted for ca. 70%
of the total investment in the province, but an important part
of private funds were still idle, estimated at about 350 billion
Yuan, ten percent being in the hands of Wenzhou people alone.

5. The Challenges: Still Serious

Generally speaking, the economic situation in the delta region
will remain dynamic and stable in the near future. The year's
GDP growth target of 7 %, set by the central government for the
whole of China, and a double-digit increase for the delta region
provinces will be realized.

To accelerate the economic growth, Chinese governments, central
and local, continued to pursue an pro-active monetary and fiscal
policy. They took measures to stimulate investment, consumption
and exports. In February 2002, the Chinese central bank lowered
its interest rate for the eighth time since 1996 ( the last change
took place in September 1999). The benchmark one-year interest
rate of fixed bank deposits was reduced by a 0.27 percentage point
to 1.98 percent. China issued 150 billion Yuan (18.1 billion USD)
in government bonds last year, so that the total volume of the
outstanding long-term bonds since 1998 increased to 510 billion
Yuan (61.6 billion USD). Huge investments in infrastructural construction
will thus be continued. Beijing winning the bid to host the 2008
Olympic Games will also add fuel to the country's economy in the
coming years.

But the challenges are still there. The Chinese government is
facing not only the slowdown in the world economy (especially
in the markets of the United States and Japan), strongly reducing
demand from abroad and slowing export growth in recent months
but also slower growth of private consumption, which was badly
influenced by the deteriorating employment situation and lagging
farmers` income.

Re-employment of the laid-off workers remains a big problem all
over China. By the end of 2001, 6.8 million people in the urban
areas across the country were registered as unemployed. In addition,
there were approximately 150 million jobless farmers in rural
areas, flooding into cities and looking for employment opportunities.
Their presence has a clear dampening effect on the employment
situation as their employment or unemployment does not show in
any official statistics. Situations in Zhejiang and Jiangsu are
relatively good, while employment remains a big problem in Shanghai.
The urban unemployment rate reached 3.8 % (with 218,000 laid-off
workers), a peak in the official statistics. About four million
immigrant workers from other provinces (mainly from Anhui, Henan,
Sichuan and northern part of Jiangsu ) marked the employment situation
in Shanghai. China will see an annual average of 12 million to
13 million new workers entering the work force. Over the coming
years the country is undoubtedly going to experience the most
serious pressure on the labour market since the economic opening
in 1979.